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  • Martyn Johnson

Don't Invest

...seems a strange thing to say given that our business is involved in personalised investing. There are times however when investing is not a good idea and I consider this further below.


When Not to Invest or at least pause for thought and go through this list:


Objectives

First work out what you want; if you don’t have clear objectives then stop and think about it. Do you need income, growth or both - and what happens in a financial emergency?


Timescale

This is important – the ‘5 plus years’ rule applies. Example: if two people buy the same shares in a large UK bank but have different objectives. The first purchaser intends to sell at a profit within six months whereas the second intends holding the share for six years. I would consider the former to be a speculator (aka gambler) whereas the second I would class as an investor. This then is the first red light – unless you are a gambler be prepared take a view of five plus years.


Research

Avoid ‘Fred in pub’ – do your own research if you are investing – our pay someone like us to do it. Dartboard share selection is dodgy. Buying into something that has just rocketed is generally a bad idea. Reading decent financial publications is a good idea and also combats insomnia.


Liquidity

This is the fancy name for how easy it is to get your money back when you want out. For example, property is illiquid – if you are hungry, you cannot take a few bricks from the wall down to corner shop to buy food. Some investments are not easily or quickly tradeable – if you are not sure then hold off.


Emergency funds

Money in the bank (especially now) gets hit by inflation, it is however essential to keep between six- twelve-months normal expenditure on deposit as a minimum – don’t invest until you have accumulated this amount.


Debt

One of the first things you should think about before investing is clearing debt. Much depends here on the terms of the debt – cost (interest rate) cashflow affordability etc. Often it is better to clear debt rather than invest.


Risk

Risk levels can be managed but not eliminated, especially in the short term. Think of risk like a staircase – the higher you are, if you fall off the more it hurts. When investing there will be occasions when the numbers will go down (this is happening just now); you need to decide if you are going to lose sleep over this – if so then don’t invest.


Cost & Help

Do I need professional help? Your tax position, family needs and particularly the amount to be invested are relevant here; you don’t need a surgeon to put on a sticking plaster. Put another way you don’t need to pay a garage to service your Ford Popular but you might need them to deal with your Ferrari. As an example we start at £250,000 of investable funds.


Summary

I suggest using the above points as a checklist before you start to think about investing.


‘When is a good time to invest?’ – is a question commonly asked of us. Markets at the time of writing are down and now is arguably a good time since generally the best time to invest is when everybody else is panicking or selling, but - as above, if you are likely to have sleepless nights… don’t do it.


The big picture is that time in the market is more important than market timing; that is providing you are investing over the medium term you are likely to achieve better returns than cash, and of course the rest of the stuff above has been considered.

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